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SOCIETE GENERALEFACTORINGActivity report2018
CONTENTS
PARTNER FOR YOUR GROWTH
FOREWORD
GOVERNANCE
KEY FIGURES
WORLDWIDE SCOPE
REPORT OF THE STATUTORY AUDITORS
FINANCIAL REPORT
EXPLANATORY NOTES
03
04
05
06
07
08
12
14
Keep up to date with our latest news and all the useful information on our products and services at www.factoring.societegenerale.com
Communication/Marketing [email protected]
PARTNERFOR YOUR GROWTH
SOCIETE GENERALE FACTORING (formerly Compagnie Generale d’Affacturage), providessolutions for businesses to finance, manage and guarantee their receivables. Major factoringcompany on the French market and growing internationally, it is a fully owned subsidiary of theSociete Generale Group.
Founded in 1974, Societe Generale Factoring France has more than 300 employees, mainly basedin its metropolitan areas (Paris and Lyon), and Reunion Island. In terms of governance, SocieteGenerale Factoring France is leading the worldwide factoring business line of the Group.
As a specialist in short term financing and inter-company credit (financing of trade receivablesand accounts payables, management and guarantees), Societe Generale Factoring hasdeveloped a wide range of products to meet all customer needs, whether small, medium, orlarge companies, in France or abroad.
Its business expertise and proximity to customers make it a preferred partner for companiesseeking innovative financing solutions specifically tailored to fit their needs.
2018 ACTIVITY REPORT 3
FOREWORD
“Our 2018 achievement : being a company that combines growth, transformation and innovation to always better serve its customers”
Ambitious growth strategyFor the next five years, we aim to renew our performance of the past five years: to double the amount of receivables purchased. To reach that goal, we will strengthen our presence in France and abroad. Our global transformation in 2018 has laid a solid foundation both in terms of organization and in terms of digitization, which will enable our success.
Focus on group synergiesWe are aligned with the Societe Generale Group's strategy, and we continuously reinforce synergies with other business lines, more specifically with Global Transaction Banking (GTB), in the area of payment and business services.
Strong and recognised valuesFor over 40 years, Societe Generale Factoring has relied on the expertise and commitment of its employees, in order to develop solutions that generate added value for our customers. Innovation is a strong lever that has allowed the company to be recognized within the Group, but also by its peers, particularly within the Factor Chain International Association (FCI).
2018 : record growthThe French factoring market is still growing, +10,2% in 2018, which makes it the first solution for short term financing for businesses. We have reached a historic amount of receivables financed, 50 billion euros, thus a growth of 24% vs 2017.
Our teams remain mobilized around the fundamentals of our business to help customers around financing, management and guarantee of receivables.
2018 ACTIVITY REPORT 4
ERIC FRACHON, CHIEF EXECUTIVE OFFICER
1ST
Executive committee
BOARD OF DIRECTORS AUDITORSPascal AUGE - Director and chairman of the board of directorsDidier BOOREE - DirectorPhilippe DEWEVRE - Standing representative of Societe GeneraleEric FRACHON - DirectorAgnes JOLY - DirectorLaurence LASFONT - DirectorLaurent GOUTARD - Standing representative of Societe GeneraleFinancial Services HoldingCecile WAYMEL - DirectorJean-Philippe GUILLAUME - Director
Deloitte & Associes represented by Marjorie BLANC-LOURME
Ernst & Young Audit represented by Vanessa JOLIVALT
ROW
2018 ACTIVITY REPORT 5
From Left to Right:
1st row: Arnaud DE LA MORANDIÈRE Head of Risks, Marie-Pierre DEVIDTS Head of Stategic Development & Marketing, Nathalie CRABIE-GLONHead of Finance, Philippe POUGEARD Deputy CEO, Head of Networks, Jérémie WILENSKI Head of Steering & Transformation, Éric FRACHONChief Executive Officer, Jonathan CROFT Head of Business & Information Solutions, Stéphane-Alexandre BADOY Deputy CEO, Payables &Receivables Finance, Éric FLOUR Deputy CEO, Head of Resources, Isabelle COCAIGN Head of Human Resources, Guillaume D’ESCRIVAN ChiefOperating Officer, Alain DUPEYRON Head of Operations, Pierre DEMPERE Head of Corporate.
2nd row: Luc HENRY Head of Retail Client Management, Xavier LEBLANC Head of Retail Commercial Development, Aneta PÉLÉGRY GeneralSecretary, Head of Compliance.
GOVERNANCE
MARCH 2019
2NDROW
KEY FIGURES
€ 6,1Bn€6,1 BILLION EUROSAVERAGE OUTSTANDING
€ 50Bn€50 BILLION EUROSPURCHASED RECEIVABLESOF WHICH 35% INTERNATIONAL
BEST FACTORING SERVICESAWARDED « BEST FACTORING SERVICES » IN EUROPE & EMEA
330330 EMPLOYEES
60006000 CLIENTS
€ 107M€107 MILLION EUROSNET BANKING INCOME
2018 ACTIVITY REPORT 6
2018 ACTIVITY REPORT 7
WORLDWIDE SCOPE
ASIA> China> Hong Kong> Singapour
EUROPE
> Austria> Belgium> Bulgarie> Czech Republic> Denmark> France> Germany> Irland> Italy> Luxembourg> Montenegro> Norway> Netherlands> Poland> Portugal> Spain> Romania> Russia> Serbia> Sweden> Switzerland> United Kingdom
AFRICA> Burkina Faso > Cameroon> Ivory Coast> Ghana> Reunion Island*> Morocco
Scope of intervention
Local presence
OCEANIA> Australia> New-Zeland
AMERICA> Canada> Mexico> United States
* Réunion Island included in France
For the year ended december 31st, 2018At the General Meeting of Societe Generale Factoring (formerly Compagnie Generale d’Affacturage).
Basis of our opinionWe have performed our audit in accordance withprofessional standards applicable in France. We believethat the evidence we have collected is sufficient andappropriate to provide a basis for our opinion.The responsibilities incumbent on us under thesestandards are set out in the section "Auditors'responsibilities for auditing the annual accounts" of thisreport.
Justifications of assessmentsPursuant to the provisions of Articles L. 823-9 and R. 823-7 of the French Commercial Code relating to thejustification of our assessments, we bring to yourattention the key points of the audit relating to the risksof material misstatement which, according to ourprofessional judgment, were the most important for theaudit of the annual accounts of the year, as well as theresponses we have given to these risks.The assessments thus made fall within the context of theaudit of the annual financial statements taken as awhole and the formation of our opinion expressedabove. We do not express an opinion on separate itemsof the annual accounts.
On the financial statements
2018 ACTIVITY REPORT 8
OpinionIn compliance with the engagement entrusted to us byyour board of directors and your general meeting, wehave audited the annual accounts of Societe GeneraleFactoring for the year ended December 31, 2018, as theyare attached to this report.
We certify that, in the light of French accounting rulesand principles, the annual accounts are fairly presentedand give a true and fair view of the results of theoperations of the past financial year and the financialposition and assets of the company at the end of theyear. The opinion expressed above is consistent with thecontent of our report to the Audit Committee.
We carried out our audit mission in accordance with theindependence rules applicable to us, covering theperiod from January 1, 2018 to the date of our report,and in particular we did not provide any servicesprohibited by Article 5 (1) of Regulation (EU) No537/2014 or the Code of Ethics of the profession ofExternal Auditor.
REPORT OF THE STATUTORY AUDITORS
We attest to the existence, in the section of themanagement report of the Board of Directors devoted tocorporate governance, of the information required byArticles L. 225-37-3 and L. 225-37-4 of the French Codetrade.
With regards to the information provided pursuant to theprovisions of Article L. 225-37-3 of the FrenchCommercial Code on compensation and benefits paid tocorporate officers and the commitments made in theirfavor, we verified their consistency with the financialstatements or with the data used to establish theseaccounts, and, when necessary, with the elementscollected by your company from the companiescontrolling your company or controlled by it.
2018 ACTIVITY REPORT 9
Specific verifications and informationIn accordance with the professional standardsapplicable in France, we have also performed thespecific controls required by the legal and regulatorytexts.
We have nothing to report as to the fair presentation andthe consistency with the financial statements of theinformation given in the management report of theboard of directors and in the other documents on thefinancial position and the annual accounts addressed tothe shareholders in question, except for the point below.
The sincerity and consistency with the financialstatements of the information relating to the paymentperiods referred to in Article D. 441-4 of the FrenchCommercial Code call on us for the followingobservation: as indicated in the management report, thisinformation does not include banking and relatedoperations, your company considering that they do notfall within the scope of the information to be produced.
On the basis of this work, we certify the accuracyand sincerity of this information.
In accordance with the law, we have ensured thatthe various information relating to equity andcontrolling interests and to reciprocal participationhas been communicated to you in the managementreport.
Responsibility of the management and persons forming the corporate governance relating to the annual accounts
It is the responsibility of the management toprepare annual accounts presenting a true and fairview in accordance with French accounting rulesand principles and to set up the internal control itdeems necessary for the preparation of the annualaccounts that do not contain any significantanomalies, from fraud or from errors.When preparing the annual accounts, it is theresponsibility of the management to assess theability of the company to continue to operate, topresent in these accounts, when appropriate, thenecessary information relating to the continuity ofoperations and apply the operating accountingpolicy unless it is intended to wind up the companyor to cease trading.
REPORT OF THE STATUTORY AUDITORS
2018 ACTIVITY REPORT 10
Responsibilities of the auditors relating to theaudit of the annual accountsIt is our responsibility to prepare a report on theannual accounts. Our objective is to obtainreasonable assurance that the financial statementstaken as a whole do not contain any materialmisstatements. Reasonable assurance is a high levelof assurance, but it does not guarantee that an auditperformed in accordance with professional standardswill systematically detect any material misstatement.
Anomalies may arise from fraud or error and areconsidered significant when it can reasonably beexpected that they, taken individually or incombination, may influence the economic decisionsthat account users take in their business based onthese anomalies.
As stated in Article L. 823-10-1 of the FrenchCommercial Code, our mission of certification ofaccounts is not to guarantee the viability or thequality of the management of your company.
As part of an audit conducted in accordance with theprofessional standards applicable in France, thestatutory auditor exercises his professional judgmentthroughout this audit.
In addition:
► he identifies and assesses the risks that the annualaccounts contain material misstatements, whetherfrom fraud or error, defines and implements auditprocedures to address these risks, and collectsevidence that he considers sufficient and appropriateto base his opinion.The risk of not detecting a significant anomaly fromfraud is higher than that of a significant misstatementresulting from an error, as the fraud may involvecollusion, forgery, voluntary omissions,misrepresentation or circumventing internal control;
► he check upon the internal control relevant to theaudit in order to define appropriate audit proceduresin the circumstances, and not for the purpose ofexpressing an opinion on the effectiveness of theinternal control;
The Audit Committee is responsible for following theprocess of preparing financial information and formonitoring the effectiveness of the internal controland risk management systems, as well as, whereapplicable, the internal audit, with respect toprocedures relating to the preparation andprocessing of accounting and financial information.
The annual accounts have been approved by theBoard of Directors.
REPORT OF THE STATUTORY AUDITORS
DELOITTE & ASSOCIÉS MARJORIE BLANC-LOURME
Paris-La Défense, May 20th, 2019The statutory auditors
ERNST & YOUNG AUDITVANESSA JOLIVALT
2018 ACTIVITY REPORT 11
Among the elements disclosed in the report to theAudit Committee are the risks of materialmisstatement, which we consider to have been themost important for the audit of the financialstatements for the year and which thereforeconstitute the key points of the audit, which it is ourresponsibility to describe in this report.
We also provide the audit committee with thedeclaration provided for in Article 6 of Regulation(EU) No 537-2014 confirming our independencewithin the meaning of the rules applicable in Franceas laid down in particular by Articles L. 822 -10 to L.822-14 of the French Commercial Code and in theCode of Ethics of the profession of statutory auditor.Where appropriate, we discuss with the auditcommittee the risks to our independence and thesafeguards applied.
Report to the audit committeeWe provide the audit committee with a report thatoutlines, among other things, the scope of the auditwork and the work program implemented, as well as theconclusions arising from our work. We also inform,where appropriate, the significant weaknesses ofinternal control that we have identified with respect tothe procedures relating to the preparation andprocessing of accounting and financial information.
► he assesses that the accounting methods used areappropriate and that the accounting estimates made bymanagement are reasonable, as well as the informationconcerning them provided in the annual accounts;
► he assesses that the management's application of theoperating accounting policy is appropriate and,depending on the evidence gathered, the existence ofsignificant uncertainty related to events orcircumstances likely impact the company's ability tocontinue operating.
This assessment is based on the information collectedup to the date of his report, although it is mentionedthat subsequent circumstances or events could laterjeopardize the continuity of operations.
If he concludes that there is significant uncertainty, hedraws the attention of the readers of his report to theinformation provided in the annual accounts about thisuncertainty or, if this information is not provided or isnot relevant, he formulates a qualified certification or arefusal to certify;
► he assesses the overall presentation of the annualaccounts and assesses whether the annual accountsreflect the underlying transactions and events so as togive a true and fair view.
REPORT OF THE STATUTORY AUDITORS
2018 ACTIVITY REPORT 12
FINANCIAL REPORT- BALANCE SHEETASSETS (KEUR) DEC 31-2018 DEC-31-2017LOANS DUE FROM CREDIT INSTITUTIONS 851 774 605 686
TRANSACTIONS WITH CLIENTS 9 370 444 7 806 733
EQUITY AND OTHER LONG-TERM SECURITIES 224 215
INTANGIBLE FIXED ASSETS 17 742 13 877
TANGIBLE FIXED ASSETS 2 765 1 820
OTHER ASSETS 3 381 2 554
ADJUSTMENT ACCOUNTS 13 393 8 412
TOTAL 10 259 723 8 439 297
LIABILITIES (KEUR) DEC 31-2018 DEC-31-2017
DUE TO CREDIT INSTITUTIONS 8 381 052 6 566 762
TRANSACTIONS WITH CLIENTS 1 647 808 1 671 819
DEBTS REPRESENTED BY A SECURITY 33 147 22 537
OTHER LIABILITIES 30 163 19 897
REGULARISATION ACCOUNT 45 983 54 865PROVISIONS FOR RISKS AND CHARGES 2 370 2 481EQUITY 119 199 100 936
CAPITAL 14 400 14 400
RESERVES 86 533 61 658
RETAINED EARNINGS 3 2
RESULT 18 264 24 875
TOTAL 10 259 723 8 439 297
OFF BALANCE SHEET (KEUR) DEC 31-2018 DEC-31-2017COMMITMENTS GIVEN
GUARANTEE COMMITMENTS 1 332 159 2 359 340
COMMITMENTS RECEIVED
FINANCING COMMITMENTS 259 255 223 785
GUARANTEE COMMITMENTS 2 291 366 1 773 620
2018 ACTIVITY REPORT 13
FINANCIAL REPORT- INCOME STATEMENT
INCOME STATEMENT IN (KEUR) DEC 31-2018 DEC-31-2017
+ FINANCING COMMISSIONS 73 409 55 309
+ INCOME FROM INTERBANK TRANSACTIONS 13 113 3 018
- EXPENSES ON INTERBANK TRANSACTIONS -32 619 -6 228
+ SERVICE COMMISSIONS 59 248 57 692
+ COMMISSIONS (PRODUCTS) 4 700 4 790
- COMMISSIONS (EXPENSES) -11 249 -9 983
+ OTHER BANKING INCOME 791 988
- OTHER BANKING EXPENSES -39 -795
NET BANKING INCOME 107 353 104 791
- GENERAL OPERATING EXPENSES -64 956 -61 409
- ALLOCATIONS TO DEPRECIATION AND PROVISIONS FOR DEPRECIATION ON TANGIBLE AND INTANGIBLE ASSETS -5 725 -5 069
GROSS OPERATING PROFIT/LOSS 36 672 38 313
+/- COST OF RISK -6 966 -995
OPERATING PROFIT/LOSS 29 706 37 318
+/- GAINS OR LOSSES ON FIXED ASSETS 0 -53
PRE-TAX PROFIT/LOSS 29 706 37 265
+/- NON-RECURRING PROFIT/LOSS 0 -2
- CORPORATION TAX -11 443 -12 388
NET EARNINGS 18 264 24 875
Annual accounts ended december 31, 2018
Accounting rules, methods and principlesThe financial statements of Societe Generale Factoringhave been prepared in accordance with the provisionsof the Accounting Chart for Credit Institutions, ANCRegulation No. 2014-07 on the accounts of companiesin the banking sector. All amounts are indicated inKEUR. The information presented in the notes to theannual financial statements focuses on those that arerelevant and material in relation to the financialstatements of Societe Generale Factoring, its activitiesand the circumstances in which they occurred duringthe period.
Capital assets and depreciationsIntangible assets managed internally
Since 2014, IT projects which are internally generatedand related to a clearly individualised project arerecognised as fixed assets if the total cost of theproject concerned is higher than 50K€.
Other capital assets - depreciations
A part from capital assets generated internally, theintangible assets are essentially composed of computersoftware. They are depreciated using the straight-linemethod over 4 years. Tangible assets are depreciatedusing the straight-line method over 3, 5 or 10 years.
Receivables and depreciation credit riskDoubtful receivables - debtors
In accordance with Article 2221-1 of the ANC Regulation2014-07 of the Accounting Standards Authority, accountsreceivable outstanding for more than 3 months after theirnotional maturity have been classified as "bad debts", orthe existence of any unpaid one can conclude to theexistence of a proven risk, or if there is a contentiousprocedure.Only receivables from sound clients are likely to beclassified as doubtful bad debts. Debt receivables, whetherdoubtful or not, on litigatin clients, do not appear in baddebt accounts receivable. Their amount is taken intoaccount in the calculation of the bad loans clients. It shouldbe noted that these receivables can be extended by up to120 days, subject to agreement.
Doubtful debts from clients
The account “irrecoverable doubtful debt from clients”records the amounts due by clients in litigation. The shareof debt covered by guarantees is reclassified as “ordinarydoubtful debt”, as provided for in the opinion n°2003-Gfrom the Emergency Committee of the French NationalAccountancy Board. The ordinary doubtful debt accountalso includes the balances of clients’ current accounts thathave remained unpaid for 90 consecutive days.
On the balance sheet and the income statement
2018 ACTIVITY REPORT 14
Societe Generale Factoring, factoring subsidiary of Societe Generale, offers companies solutions for managing, financing and guaranteeing their trade receivables. The company changed its name on June 26, 2018.
EXPLANATORY NOTES
Contagion ruleAs specified in article 8 of regulation n°2002-03 from theFrench Accounting Regulatory Committee, the generalprinciple is to apply the contagion rule, meaning toconsider, for a debtor, all exposure related to theirSIREN (government number) and, for a client inlitigation, all outstanding debts for this client.
An exception to the contagion rule is for receivables inthe following cases:
Depreciations on doubtful accounts receivableNot all debtor doubtful receivables will necessarily bedepreciated, and the depreciations can be appliedeither with regards to a client risk or to a debit risk, inaccordance with the following table:
(1) According to the rules n°2002-03 of december 12th, 2002 of the emergencycomitee of CNC, compromised debtor doubtfull receivables include, besidesreceivable in legal action, all the receivables included in the doubtful outstandingsince more than one year (i.e 455 days before theoretical term).
Simple contested receivables and simple doubtfulreceivables are not representative of a known risk and,therefore, are not depreciated.
Depreciation on doubtful debts from clientsClient cases are sent to the litigation service andrecorded as irrecoverable debt when the risk of non-payment is ascertained.
CommissionsThe service commission that remunerates all factoringservices is applied ad valorem to the amount oftransferred invoices.
The advance or financing commission remunerates thefunding granted by Societe Generale Factoring to itsclients.
2018 ACTIVITY REPORT 15
• for disputed receivables, where the participant isnotoriously creditworthy. In this case, if the disputecan not be resolved, the participant will reimburseSociete Generale Factoring in accordance with thecontract;
• for non-contentious receivables: when the contract is recourse, because in this
case the credit risk depends on thecreditworthyness of the client,
when the debtor is notoriously creditworthy(administration or large account),
when it is found for a given debtor, thatpayments have resumed on a regular basisfor the amounts corresponding to the originalcontractual deadlines, as provided for inArticle 6 of Regulation 2002-03 of the Comitéde la Réglementation Comptable .
EXPLANATORY NOTES
Client risk Debtor risk
Depreciatedreceivables
Contested andCompromised (1)
Doubtfulcompromised (1)
Non-depreciatedreceivables Simple contested Simple doubtful
Societe Generale Factoring3, rue Francis de Pressensé93577 La Plaine Saint-Denis CedexPhone +33 (0) 1 71 89 99 99Fax +33 (0) 1 71 89 24 00702 016 312 R.C.S. BobignySA with share capital of 14 400 000 €www.factoring.societegenerale.comPhoto Credit: © Getty Images © Jean-Marie Cras SGF / SDM / 09/07/2019